Friday, September 27, 2013

The Smell of Financial and Economic Collapse is in the Air

This is a continuation from part 1 - read it here.CAUTION! Before you continue...

If you believe that total government debt can grow FOREVER and
more rapidly than the underlying economy, this article is NOT for
you.

If you believe that governmental deficit spending, QE, and bond
monetization can continue FOREVER without major consequences, this
article is NOT for you.

But if you are sane enough to know that our current economic policies will produce a "train wreck," read on...

The U.S. economy is being overwhelmed by a loss of faith and
trust in politicians, government, and bankers, excessive debts,
artificially low interest rates, unsustainable deficit spending,
expensive wars, QE (money printing) to infinity, "Inflate or Die"
monetary policy, potential derivatives implosion, Obamacare and so
much more. A slow-motion collapse is occurring and most of us do not see
it. Consider these thoughts from insightful writers:

Collapse Indicated by Stalling Growth in Global Financial Reserves:

Hugo Salinas Price: (link)"As it is, the US can only continue to monetize government
debt. Higher dollar interest rates are inevitable and will cause
further government deficits; the debt overhang in both the US and
Euro Zone is so great that a rise of a few points in interest rates
will explode the deficits, and so on and so forth.Bottom line: Stalling growth in International Reserves tells me that a world financial collapse is in the offing."

Collapse Indicated by Loss of Trust in Western Economic Systems:

David Stockman: (link)"There is no honest pricing left at all anywhere in the world
because central banks everywhere manipulate and rig the price of
all financial assets. We can't even analyze the economy in the
traditional sense anymore because so much of it depends not on
market forces, but on the whims of people at the Fed.""The Blackberry Panic of September 2008, in which Washington
policy makers led by former Goldman Sachs CEO Hank Paulson,
panicked as they saw Wall Street stock prices plummet on their
mobile devices, had very little to do with the Main Street economy
in the United States. The panic and bailouts that followed were
really about protecting the bonuses and incomes of very wealthy and
politically well-connected managers at banks and other heavily
leveraged businesses that were eventually deemed too big to fail. What
followed was a massive transfer of wealth from the taxpayers and
middle-class savers, in the form of bailouts and zero interest
rates on bank deposits imposed by the Fed, to the so-called One
Percent.""I think the political realities of the situation make
the most likely scenario one in which there will be some kind of
real financial collapse and disorder that will require a total
reconstruction of the system."The Burning Platform: (link)"Despite the frantic efforts of the financial elite,
their politician puppets, and their media propaganda outlets,
collapse of this aristocracy of the moneyed is a mathematical
certainty. Faith in the system is rapidly diminishing, as the
issuance of debt to create the appearance of growth has reached
the point of diminishing returns.""We are witnessing the beginning stages of political collapse.
The government and its leaders are being discredited on a daily
basis. The mismanagement of fiscal policy, foreign policy and
domestic policy, along with the revelations of the NSA conducting
mass surveillance against all Americans has led critical
thinking Americans to question the legitimacy of the politicians
running the show on behalf of the bankers, corporations and arms
dealers.""We are supposedly five years past the great crisis. Magazine
covers proclaimed Bernanke a hero. If we are well past the crisis,
why are the extreme emergency measures still in effect? If the
economy is growing and jobs are being created, why do we need $85
Billion of government debt to be monetized each and every month?""Just the slowing of debt creation will lead to collapse.
Bernanke needs a Syrian crisis to postpone the taper talk. Those in
control need an endless number of real or false flag crises to
provide cover for their printing presses to keep rolling."Bill Fleckenstein:link"Since April, the 10-Year has gone from about 1.6% to as high as
3% recently. Now we have to see when this rally in bonds stops. The
bond market will then roll over and then the Fed won't have the
tapering as an excuse. It means the bond market has ceased to price
in the scenario that the Fed wants, and the bond market is not
responding to the Fed's moves in the short-run. In the old days we
would call that 'losing control of the bond market.' And if that
starts to happen, all hell is going to break loose."Michael Pento:link"The 10-Year went from 1.4% to 3%, and that made Mr. Bernanke
panic. The average on that (10-Year) yield is 7% in the modern era
since 1971 when we closed the 'gold window.' So, if the average is
7%, and the United States of America, this once great land, can't
(even) tolerate a 3% yield on the 10-Year Note, that means the Fed
can never unwind QE.That's enough to cuff Mr. Bernanke's hands. So the Fed
is indeed trapped as you indicated. They cannot significantly
bring down QE. That means a perpetual increase in the Fed's
balance sheet. That (also) means an inexorable rise in asset
bubbles like stocks, bonds, and real estate, and it's going to
end (very) badly."Hank Paulson Interview:link"Paulson believes there will be another financial crisis.""It's a certainty. As long as we have markets, as long as we
have banks, no matter what the regulatory system is, there will be
flawed government policies. Those policies will create bubbles."

Alternate Interpretation: As long as we have Treasury Secretaries who
represent the interests of Goldman Sachs and Wall Street bankers
instead of the US economy, then we can be certain of another financial
crisis.

Collapse in Retirement Income:

Dennis Miller:link"While the Federal Reserve holds down interest rates and floods
the banking system with money, it's destroying the retirement
dreams of several generations. The Employee Benefit Research
Organization reports that 25 - 27% of baby boomers and Generation
Xers who would have had adequate retirement income - under return
assumptions based on historical averages - will run out of money if
today's low interest rates are permanent."

In addition to the problem of low yielding investments caused by the
historically low interest rates created by the Fed, even more retirees
will run out of money, much sooner, when the inevitable inflation in
food and energy prices smacks the U.S. economy, and especially
retirees.

Discussion:

It seems clear that we are losing faith in our politicians, our
leaders, and our financial systems. Approval levels for congress
and the President of the United States are low. Too-Big-To-Fail
banks and "banksters" are despised and openly criticized.

The Federal Reserve is losing credibility; more and more people
are realizing that QE is good for the bankers and the wealthy, but
that it does little for "Main Street" people except drive up the
prices they pay for food and energy.

The American public is generally opposed to war in the Middle
East but that seems to matter little to the political and financial
elite who will profit from the war.

Most people, so it appears, know that inflation is much higher
than officially stated, and that inflation will become far worse
than it is today. (When was the last time you saw a cup of premium
coffee or a gallon of gasoline for less than $1.00?)

Consider this verse from "Desolation Row" - by Bob Dylan (in the
1960s). Does it describe our currently collapsing financial and
political systems?

"They're selling postcards of the hanging They're painting
the passports brown The beauty parlor is filled with sailors The
circus is in town Here comes the blind commissioner They've got
him in a trance One hand is tied to the tight-rope walker The
other is in his pants And the riot squad they're restless They
need somewhere to go As Lady and I look out tonight From
Desolation Row"

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